U.K. IPO Brings Down the House

Keep calm and party on. That is the refrain in the U.K. housing sector. Home prices are rising quickly again, and the government has started selling its stake in Lloyds Banking Group, a lender it helped rescue. So the timing of the initial public offering of real-estate-agent Foxtons Group on Friday couldn’t have been better.

The company, familiar to all Londoners thanks to the distinctive green Minis its agents drive, priced at the top end of its indicative range, valuing Foxtons at £649 million ($1.04 billion). It then enjoyed a 16% pop in first-day trading. The goodwill toward Foxtons comes at a price: At 18 times expected 2014 earnings, it already was at a premium to the sector at its IPO price. With house prices in London rising 9.7% year over year in July, the euphoria is understandable, even if it might induce some queasiness. Société Générale’s perma-bear Albert Edwards this week described the U.K. housing market as “one continuous bubble.”

Investors’ response seems to be that if the bubble is continuous, keep the revelry going.